In re Gujarat Narmada Valley Fertilizers & Chemicals Limited (GST AAR Gujarat)
Gujarat Authority for Advance Ruling (AAR) has denied Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC) the benefit of Input Tax Credit (ITC) on expenses incurred for the buyback of shares. The company argued that buyback activities were undertaken in the course or furtherance of business and should qualify for ITC under Section 16 of the CGST Act, 2017. GNFC contended that costs related to professional fees, legal expenses, and other charges directly contributed to business objectives and were therefore eligible as input services.
The AAR ruled against GNFC, citing that under Section 2(52) and 2(102) of the CGST Act, securities, including shares, are excluded from the definition of goods and services. Since ITC can only be availed on goods and services, the expenses related to share buyback fall outside the scope of Section 16, making GNFC ineligible for tax credit. The ruling further clarified that even if buyback enhances business operations, the nature of the transaction remains outside the GST framework.
Judicial precedents, including the case of Coca-Cola India (P.) Ltd. and the European Court of Justice ruling in Kretztechnik, were referenced by GNFC to support their claim. However, the AAR maintained that buyback transactions do not involve the supply of goods or services and thus cannot qualify for ITC. Additionally, GNFC was directed to reverse any ITC claimed on common inputs and input services linked to buyback expenses.
